Global Currency Updates: Chinese Yuan, Turkish Lira, Argentine Peso

CNY: As per our long-held expectations, the Chinese yuan's appreciatory trend came to a halt at the beginning of this year. While we believe that the currency's most aggressive depreciation is now behind it, we note that central bank policy as well as market forces suggest that the yuan will likely end 2014 slightly weaker than its current level (CNY6.24/USD) before stabilising over the long term. As such, we have downgraded our end-2014 forecast to CNY6.3500/USD from CNY6.2000/USD previously.

TRY: The lira's recent run of appreciation against the US dollar is running out of steam, in line with rising US yields and domestic monetary easing. A wide current account deficit, sluggish external rebalancing, and a fundamentally dovish central bank will keep the currency on a depreciatory path over the next two years. Our end-2014 target is TRY2.20/USD.

ARS: We expect the Argentine peso to weaken slightly over the next several weeks, likely hitting the ARS8.15/USD level by mid-July, given the current trajectory. Even after accounting for the effects of the January 23 currency devaluation, the peso remains overvalued due to years of high domestic inflation that have created substantial external account imbalances. While we do not forecast another devaluation this year, we believe that the monetary authorities will be forced to allow a gradually weaker peso in order to meet demand for dollars while preventing a blow-out in the black market rate or a dangerous depletion of the country's foreign currency reserves.